Thousands of poor families are topping up their energy meters by £10 - only for £9 of it to be clawed back in debt.
Damning figures show almost 300,000 people with pre-payment meters may be having debts taken off their top-up payments by their electricity firm.
That means up to 90% of the amount they put on does not actually go to funding their electricity or gas.
It comes as Ofgem prepares to make its announcement this Friday on a huge hike in the energy price cap from October 1.
Debt help website DebtBuffer.com - which obtained the figures through FOI requests - warned the policy will cause "a spiral of debt many will find difficult to escape".
Since January 2019 the number of households that could have debts taken off their pre-payment gas meters has soared from 208,000 to 299,000.
On electricity meters it’s risen from 229,000 to 300,000.
Pre-payment meters are installed - sometimes by court order - in some of the poorest customers’ homes to ensure they don’t fall into arrears.
But they can still end up with debts when firms add emergency credit to their account, or if they fall behind on weekly contributions to part of a wider plan to pay off their debts.
DebtBuffer.com said firms can take between 30% and 100% of every top-up payment to claw back debt.
British Gas’ website confirms it takes 90% of top-ups to pay back debts.
It says: “If you don’t top up enough to pay us back, don’t worry, we won’t leave you without any gas or electricity.
“When you top up, we’ll take 90% to pay towards your debt and leave 10% for your gas.
“For example, if your agreed weekly amount is £10 and you top up £10, we’ll put £9 towards your debt and leave you £1 for gas.
“You’ll still owe us £1, which we’ll take next time you top up that week.”
EDF, Octopus, Scottish Power, SSE and E.On all take 70% of gas top ups and 100% of electricity top ups, DebtBuffer said.
Heather Rose, head of debt help at DebtBuffer, said: "This analysis shows how incredibly harsh prepayment meters can be for customers who end up falling into arrears on any agreed weekly payments for debts or get into additional debt by having to make regular use of emergency credit.
"To automatically deduct 100% of any electricity arrears and up to 90% of any gas arrears before any credit can be used to heat or power households is simply not good enough. In fact, it borders on callous.
"According to Ofgem data, the average repayment term for prepayment customers with meters set to recover debt is 247 weeks.
"Ofgem needs to take firm action to prevent these impacted households being in a permanent debt spiral because of these high claw backs, and being totally unable to afford energy."
Ms Rose added: "We are urging people to ignore any calls for non-payment of bills or mass social media-promoted boycotts you might see.
"That will be the fastest way to a default on your credit file, followed by court action with a county court judgement for payment, which means bailiffs at your door and also court action to forcibly install a prepayment meter."
A spokesman for Energy UK, which represents suppliers, said: "Suppliers have to make decisions on how they recover debt from prepayment customers while being conscious of the need for them to stay on-supply. They have a duty to try and prevent customers falling further into arrears but also have to take account of their ability to pay.
"So if customers are finding it very difficult to clear any existing debt then suppliers can take that into account when setting repayment plans - and any customer in this situation should get in contact.
"Ultimately if debt isn't repaid then those costs need to be recouped elsewhere. The industry is very aware that many customers are already struggling to pay their bills and with further rises around the corner, it's inevitable that more will fall into arrears which is why we have called for the Government to increase the support it provides to customers over the next few months."
